Exhibit 99.2

(b) Pro Forma Financial Information

On June 1, 2005, Micromuse Inc. (“Micromuse”) completed its acquisition of Quallaby Corporation (“Quallaby”), a privately held software company based in Lowell, Massachusetts, pursuant to an Agreement and Plan of Merger dated as of April 7, 2005, by and among Micromuse Inc., Sydney Acquisition Inc. (a subsidiary of Micromuse), and Quallaby Corporation. Subject to the terms of the merger agreement, the purchase price was $33 million in cash. Micromuse also assumed and converted outstanding options to purchase Quallaby common stock into options to acquire approximately 1.6 million shares of Micromuse common stock. These Micromuse options and underlying shares were granted under the existing Micromuse 1997 Stock Option/Stock Issuance Plan.

The following unaudited pro forma financial statements present the acquisition of Quallaby by Micromuse accounted for using the purchase method of accounting. The unaudited pro forma financial statements are based on historical financial statements and the notes thereto of Micromuse in its annual report on Form 10-K for the year ended September 30, 2004 and its quarterly report on Form 10-Q for the nine months ended June 30, 2005 and the historical financial statements of Quallaby filed as part of this Form 8-K/A.

The unaudited pro forma condensed statements of operations combine Micromuse’s historical condensed statements of operations for the year ended September 30, 2004 and the nine months ended June 30, 2005 with Quallaby’s consolidated historical statement of operations for year ended September 30, 2004 and nine months ended June 30, 2005, respectively giving pro forma effect to the acquisition of Quallaby, as if the business combination had occurred at the beginning of the year ended September 30, 2004. All material adjustments to reflect the acquisition are set forth in the column “Pro Forma Adjustments.”

The pro forma adjustments are based on management’s estimates of the value of the tangible and intangible assets acquired. The adjustments also assume no adjustment of the cash portion of the purchase price. The actual adjustments may differ materially from those presented in these pro forma financial statements. Management has finalized its estimate of the value of intangible assets acquired based on valuation analysis performed by a valuation services firm.

The following unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and are not necessarily indicative of the combined financial position or results of operations for future periods or the results of operations or financial position that actually would have been realized had Micromuse and Quallaby been combined during the specific periods. The unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes and the historical consolidated financial statements of Micromuse and the financial statements of Quallaby contained herein, including the notes thereto. The accompanying unaudited pro forma condensed combined financial statements are presented in accordance with Article 11 of Regulation S-X.

MICROMUSE INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

Nine Months Ended June 30, 2005

(in thousands, except per share amounts)

(UNAUDITED)

Micromuse

Quallaby

Pro forma
adjustments

Note 3

Pro
Forma

Revenues:

License

56,981

1,684

58,665

Maintenance and services

59,061

1,621

60,682

Total revenues

116,042

3,305

119,347

Cost of revenues:

License

5,035

5,122

Maintenance and services

10,824

3,420

14,244

Amortization of developed technology

3,214

—

1,162

4,376

Amortization of deferred stock compensation

Total cost of revenues

19,097

3,507

23,766

Gross profit (loss)

96,945

(202

)

95,581

Operating Expenses:

Sales and Marketing

46,224

4,184

50,408

Research and Development

23,990

4,066

28,056

General and administrative

20,456

1,547

22,003

Stock based compensation and amortization of deferred stock compensation

903

—

903

Write-off of in-process research and development

2,200

Restatement and related litigation costs

447

—

447

Litigation settlement expense

10,900

Amortization of other intangible assets

461

—

600

1,061

Restructuring costs (recoveries)

(281

)

—

(281

)

Total operating expenses

105,300

9,797

115,697

Loss from operations

(8,355

)

(9,999

)

(20,116

)

Interest and other income (expense), net

3,916

(80

)

(673

)

3,163

Loss before income taxes

(4,439

)

(10,079

)

(16,953

)

Income tax provision

1,294

1,311

Net income loss

(5,733

)

(10,096

)

(18,264

)

Per share data:

Basic net income (loss) per share

(0.07

)

(0.23

)

Diluted income (loss) per share

(0.07

)

(0.23

)

Weighted average shares used:

Basic net income (loss) per share

80,641

Diluted income (loss) per share

80,641

See accompanying notes to unaudited pro forma condensed combined financial statements.

MICROMUSE INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

Year Ended September 30, 2004

(in thousands, except per share amounts)

(UNAUDITED)

Micromuse

Quallaby

Pro forma

adjustments

Note 3

Pro Forma

Revenues:

License

75,996

2,733

78,729

Maintenance and services

70,581

1,943

72,524

Total revenues

145,577

4,676

151,253

Cost of revenues:

License

5,203

5,284

Maintenance and services

11,983

2,422

14,405

Amortization of developed technology

5,908

—

1,550

7,458

Total cost of revenues

23,094

2,503

27,147

Gross profit (loss)

123,483

2,173

124,106

Operating Expenses:

Sales and Marketing

59,254

4,518

63,772

Research and Development

31,427

4,344

35,771

General and administrative

24,789

1,447

26,236

Restatement and related litigation costs

5,634

—

5,634

Amortization of other intangible assets

196

—

800

996

Restructuring costs

—

Total operating expenses

121,300

10,309

132,409

Income (loss) from operations

2,183

(8,136

)

(8,303

)

Interest and other income (expense), net

3,847

(38

)

(897

)

2,912

Income (loss) before income taxes

6,030

(8,174

)

(5,391

)

Income tax provision

1,642

1,661

Net income (loss)

4,388

(8,193

)

(7,052

)

Per share data:

Basic net income (loss) per share

0.06

($0.09

)

Diluted income (loss) per share

0.05

($0.09

)

Weighted average shares used:

Basic net income (loss) per share

79,024

Diluted income (loss) per share

81,502

(2,478

)

79,024

See accompanying notes to unaudited pro forma condensed combined financial statements.

NOTE 1. BASIS OF PRESENTATION

NOTE 2. PURCHASE PRICE

Under purchase accounting, the purchase price will be allocated to assets purchased and liabilities assumed based on their relative fair values with any excess purchase consideration recorded as goodwill. The following information of the components and allocation of the purchase price is based on Micromuse’s evaluation and review of the assets acquired and liabilities assumed. The amounts and components of the purchase price along with the allocation of the purchase price are as follows (in millions):


				Estimated Useful Life
Options assumed	$	5.9
Cash		33.0
Transaction costs		1.6

Total purchase price		40.5

Fair market value of liabilities assumed less tangible assets acquired, net*	$	(4.2	)
Intangible assets:
In-process research and development		2.2
Existing technology		5.2		4 years
Core technology		1.0		4 years
Customer contracts and relationships		1.4		4 years
Trademark		1.0		4 years
Customer relationships		1.0		5 years
Goodwill		32.9

Total intangible assets		44.7

Net assets acquired	$	40.5

*	Includes $3.1 million of cash on hand.

As part of the acquisition, the Company assumed and converted options held by Quallaby employees, resulting in issuance of 1.6 million shares of the Company’s options. These options were valued at $5.9 million, and were included as part of the purchase price (in addition to the cash purchase price noted above).

valuation of the options assumed pursuant to the acquisition uses the following assumptions: 4-year term, volatility of 0.5439, annual interest rate of 3.60%, 0.00% dividend yield, and the closing price of the Company’s stock on June 1, 2005.

The value of identifiable intangible assets was determined in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations.” Existing Technology represents the value of the existing technology for products which have been developed and reached technological feasibility. The value is calculated based on the implicit income derived from revenues for sales of existing technology. Based on the product life cycle, historical product lives, and new functionality arising from each product release, Existing Technology is estimated to have a useful life of four to five years and will be amortized on a straight line basis. Core Technology represents a combination of design methodologies, processes and trade secrets. The acquired Core

Technology represents core modular architecture that is used in the Quallaby products, both current and planned future releases. The value is calculated based on an estimate of the royalties saved because Quallaby owns the technology. Core Technology is estimated to have a useful life of four to five years, and will be amortized on a straight line basis. The value of Maintenance Agreements and Related Relationships represents the implicit income derived as a result of the fees customers pay Quallaby when customers enter into maintenance and support contracts. Based on historical attrition rates, the useful life of the Maintenance Agreements and Related Relationships is estimated to be four to five years, and will be amortized on a straight line basis. The value of the Trademark represents the estimated royalties saved because Quallaby owns the Trademark, based on an estimated royalty rate. Based on the estimated useful life of the technology, the useful life of the Trademark is estimated to be five years, and will be amortized on a straight line basis. The value of Customer Relationships represents revenue generated by Quallaby from sales of future versions of the existing product to existing customers. The value is calculated based on an estimate of the implicit income derived from this. Based on customer attrition and technology obsolescence, the useful life of Customer Relationships is estimated to be four to five years.

Micromuse identified four research projects in areas for which technological feasibility had not been established and no alternative future uses existed. These four projects represent research and development to create the next generation versions and new applications of its primary software products. Two of the four projects were approximately 11% to 15% complete, and the other two of the four projects were approximately 85% to 88% complete, as of the date of the close of the transaction. Micromuse estimates that it will cost approximately $1.2 million in additional research and development expenses to complete these four projects. The value for each of the projects was determined by estimating the expected cash flows from the projects once commercially viable, discounting the net cash flows to their present value, and then applying a percentage of completion to the calculated value. Key assumptions utilized in determining these values include:

•

discount rate of 20 to 22%, representing the cost of capital as related to the estimated time to complete the projects and the level of risk involved;

•

the percentage of completion for the projects, determined using costs incurred prior to the acquisition date compared to the remaining research and development to be completed to bring the projects to technological feasibility.

Residual goodwill has been recorded based on the purchase price remaining after allocating the purchase price to the fair market value of assets purchased less liabilities assumed and to identifiable intangible assets. Residual goodwill arises as a result of, among other factors, future unidentified new products, new technologies and new customers as well as the implicit value of future cost savings as a result of the combining of entities. In accordance with SFAS No. 142, goodwill will not be amortized but will be tested at least annually for impairment.

NOTE 3. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

The unaudited pro forma condensed combined statements of operations give effect to the acquisition as if it had occurred on October 1, 2003.

The following adjustments have been reflected in the unaudited pro forma condensed combined statements of operations for the nine months ended March 31, 2005 and year ended September 30, 2004:

a. To adjust Quallaby’s historical amortization to the amount to be recorded based on the fair values and useful lives of the identifiable intangibles recorded in the application of purchase accounting by Micromuse.

b. To reflect the loss of interest income using a 3% annual rate of return associated with the use of $31.5 million cash on hand ($33.0 million purchase price plus $1.6 million transaction costs less $3.1 million cash acquired) to fund the purchase of Quallaby.

c. To reflect the removal of common stock equivalents from weighted shares outstanding due to net loss shown on pro forma statement of operations.

MICROMUSE INC 8-K/A